Since applying for debt underwriting powers from the Federal Reserve a year ago, BancBoston Securities' junk bond group has burgeoned under the command of managing director Steven A. Shenfeld.

A veteran of Bankers Trust New York Corp., Mr. Shenfeld is armed with a strategy to underwrite junk bonds for midsize corporate clients, with annual revenues of $50 million to $500 million.

The unit has hired 35 professionals in sales, trading, capital markets, and research; co-managed three transactions; and launched its research product. The Fed approved BankBoston's application in February.

Though the competitive landscape has changed dramatically since then- with eight banking companies shoring up their investment banking business through acquisition-Mr. Shenfeld said he is not deterred.

In the coming year, the group is "on pace" to participate in 15 to 20 transactions and to lead two to four deals, he said.

"We're committed to this business, and we're pretty optimistic about our chances to finish the year strong," Mr. Shenfeld said. "It's a real fulcrum for the overall banking strategy, and we're pleased with the response from the bank."

The consolidation that has torn through the industry has actually been a "net positive" for the group, he added.

"It validates the notion of a full-service institution," Mr. Shenfeld said. "That's where we're going, and it gives us comfort that we're going in the right direction."

Still on Mr. Shenfeld's to-do list is the establishment of a three- to five-person distressed-debt desk.

"It's a good countercyclical business to underwriting," he said. BankBoston Corp. is now "actively looking at the equity business and exploring the options."

Observers noted that, given BankBoston's strong middle-market lending franchise and the scarcity of regional banks with similar capabilities, the junk bond unit has an opportunity to flourish.

Indeed, analyst Anthony Davis of Dillon, Read & Co. pointed out that few competitors in New England have similar capabilities. If BankBoston and its crosstown rival, Fleet Financial Group, do not step up to offer capital markets services, "interlopers" from other regions of the country would try to serve New England's middle market.

Lawrence Cohn, head of research at Ryan, Beck & Co., said BankBoston has "got a lot of what it takes to be successful in the junk bond business."

"They have terrific relationships with the corporate customers," he said, "and what they've got to be able to do is to convert those existing relationships into underwriting relationships."

"What is clear is that there isn't room to sustain every large middle- market lender to that business," Mr. Cohn said.

Though it's not too late for all the banking companies that have not made the investment, "as the junk bond business expands and disintermediates commercial bank lending, what happens to those middle- market lenders that have failed to participate?" he asked.

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